A gender pay gap has no place in today’s society, and it is beyond reason that almost fifty years after the Equal Pay Act was introduced in the UK, this gap still remains, not only because we don’t always pay women an equal wage for an equal value of work, unlawful in UK law, but also because women are still struggling to make it into jobs that are inherently higher paying.
Article by Dr Sumita Ketkar, Senior Lecturer, Leadership & Professional Development – Westminster Business School.
As gender pay gap reporting is now in effect, the obvious question is, what impacts it will have on mitigating the real problems causing the gender pay gap. A step in the right direction or part of a larger narrative? Let’s not wait another fifty years to find out. While the gap between the median hourly wage rates of women and men in their early 20s has reduced to nearly nil over the last few decades, a report by the Institute of Fiscal Studies last year revealed that the gap for women in their 30s and 40s had remained unchanged, and it is much worse for women from minority groups. For example, research by the Fawcett society found that the aggregate gap between white British men and women from Pakistani and Bangladeshi descent is a whopping 26 percent, while for Black African women in full time employment it is 19.6 percent. A much bigger than average wage gap in certain sectors, such as finance, makes this an even more glaring problem.
“Are we going to see companies scrambling to make a positive change and set things right? Unfortunately, the answer is probably not, at least not in the short term. It is unlikely that any substantial steps will be taken by companies to put a stop to such an unnecessary wage divide”
Even when they do make it into the predominantly male sectors or professions, women don’t usually make it all the way up to the top at board level. Equal pay and the gender pay gap tackle different issues, although the one could say that the intention behind the two is broadly the same, that is to reduce wage disparity between men and women. Equal pay states that, irrespective of gender, people doing jobs of equal value should be paid equally, while the gender pay gap highlights the overall difference between men and women’s median earnings across organisations, sectors and the overall labour market. Equal pay hasn’t been as successful as one would’ve hoped for because of the complexities involved in paying employees. Ironically, the reasons why the Equal Pay Act didn’t completely alleviate the situation could be quite similar to why the upcoming reporting regulations may not necessarily do much to help bridge the gender gap. State intervention has a clear ethical and moral case, but also a strong business case. Industries across the globe are missing out by not fully utilising the available female workforce. This particular issue has been put into perspective by a recent report by the McKinsey Global Institute, that estimated the gains from removing gender bias and inequality in the workplace, could boost the global economy by as much as $12 trillion.
Even with reports and research outlining the extensive benefits that exploiting the female workforce to its full potential would bring to organisations, businesses all over the world still tend to respond more to coercive regulatory requirements rather than calls for voluntary normative actions. For example, when the coalition Government introduced the ‘Think, Act, Report’ in 2014 – a voluntary initiative aiming to close the gender pay gap through transparency – despite over two hundred companies signing up for the principles, a mere four organisations implemented them and went on to publish their pay gap, with only two of those including different pay grades. Given this context, will the new reporting regulation help to close the gap once and for all? Will it reduce the segregation of men and women across sectors as well as levels in an organisation, which is one of the key underlying reasons for wage inequality? Are we going to see companies scrambling to make a positive change and set things right? Unfortunately, the answer is probably not, at least not in the short term. It is unlikely that any substantial steps will be taken by companies to put a stop to such an unnecessary wage divide, other than perhaps some token gestures or, at best, the announcement of mentoring schemes and increased conversations around having more women in the boardroom. Indeed, PWC recently projected that it may take up to 24 years in the UK to fully bridge the gender pay gap.
Reputational risk is widely seen as the biggest reason for companies to want to tackle the problem head on, yet, this is likely to only affect the ‘biggies’ or certain sectors, rather than every business. Similarly, it is public-sector organisations and local councils that are most likely to be under the spotlight for their gender pay gap figures far more than companies in the private sector. The optional narrative that companies can include in their reports to supplement their gender pay gap figures is likely to focus more on reasons for large gaps rather than on actions to be taken to close it. How much or how little will be communicated by companies will depend on what level of interest their stakeholders have in this information. A lack of penalties for non-compliance, particularly for the private sector, also makes the regulation weak – although this is not to suggest that penalties should be imposed for less than ideal figures.
How companies will respond to the reporting requirement remains to be seen. Reward consultants are encouraging businesses likely to score poorly on gender figures to do a dry run report before the data is published. It is hoped that this should help them to think of mechanisms to bridge the gap. However, there have been some suggestions that a few companies might even rethink recruiting at entry levels to keep the gender numbers looking good. The fact that metrics will not directly capture pay gap data between age groups could also be problematic, as the gap increases significantly in the later career stages, with women in their 30s and 40s experiencing a much wider gap than those in their 20s. Sector wide gender pay gap ‘league tables’ are an interesting proposition. If implemented correctly they could result in a much higher level of accountability for organisations, especially if their results were significantly below the industry or sector average. Nevertheless, it would also be easy for these rankings to be overly simplistic and ineffective.
This is not to say that reporting will not help. However, it will take a lot more than what is at best a snapshot of the pay and bonuses of men and women across the agreed metrics. Publishing average and median gender gap; mean and median bonus gap; proportion of men and women getting a bonus; and proportion of men and women in each pay quartiles are likely to do little to bridge the stark wage inequality that we’ve seen spanning the last several decades. Women continue to be underrepresented in high paying jobs as well as at senior levels. Disparity with bonuses and promotions versus their male colleagues has only widened the gap. Anecdotal data, supported by scholarly research suggests that women are more likely to negotiate worse wage bargains than men; while this may be surprising to many, it comes from deeply entrenched notions of what women think of their own abilities.
To make a real difference businesses and the policy makers will have to make a concerted effort. Much more is needed in order to tackle the so-called ‘motherhood penalty’ – which sees women lose out to men because of having children – and take action towards making flexible working and shared parental leave more accessible. Both the state and employers need to offer women compelling propositions to return to work through schemes such as tax-free childcare. Moves by companies such as Facebook, that is proposing to offer a wide variety of online training courses to women business owners, are an example of industry rising to occasion. Gender pay reporting is part of a larger narrative, which is undoubtedly gaining momentum at global level. From attitudes towards pay secrecy, to talks about a long-term incentive approach, to bonuses and living wages, it is clear that people expect to see fairer reward systems and therefore governments are being given the mandate to do something about it. To that extent, mandatory reporting is a step in the right direction and a decidedly well-intentioned move. While we can’t expect miracles anytime soon, a continued conversation around this topic will further open people’s minds to what is essentially a problem of mind sets. Businesses aren’t going to go out of their way to correct the situation until they view it as an organisational risk. It is only when mind-sets move to this position that we will begin to see real change. Let’s hope it won’t take another fifty years.
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